Entries in Cost & Utilization (86)

Friday
Jul132018

The Physician’s Role in Today’s Healthcare Costs

By Clive Riddle, July 13, 2018

Influencing consumer behavior to reduce healthcare costs via cost sharing and engagement strategies, and purchaser cost containment strategies of all stripes have seemingly dominated discussions of regarding the cost of healthcare. So how to physicians feel about their role in the cost equation today?

A new seven page NEJM Catalyst Buzz Survey report sponsored by University of Utah Health has just been released: Cost of Care and Physician Responsibility.   The report presents findings from the University’s survey examining how clinicians view health care costs. They “found that while clinicians feel a great sense of responsibility around keeping costs affordable for patients, they don’t feel they have the tools to know, the time to discuss, or the ability to impact how much things costs,” and furthermore “the survey results show a disconnect: Physicians feel responsible for the cost of care to a patient, but not accountable for it,”

99% of surveyed physicians said that out of pocket costs are important to patients – 62% said extremely important, 32% said very important and 5% said important.  Physicians were asked “Do the following aspects of cost enter into clinical decisions at your organization?” 76% said yes to Cost to practice/system; 72% said yes to Out-of-pocket cost for patients; 68% said yes to Total cost of care; and 36% said yes to Contribution to overall national health costs.

How much impact does each of the following stakeholders have on the cost of health care? The percentage of physicians saying each stakeholders had a strong impact were:

  •           Pharmaceutical/biotech companies  - 87%
  •           Health plans/HMOs/insurers – 81%
  •           Hospitals/health systems/physician organizations – 75%
  •           Government/regulators – 67%
  •           Individual clinicians – 60%
  •           Employers – 28%
  •           Patients – 26%
  •           Medical device manufacturers – 23%

The percentage of physicians agreeing with the following statements were as follows:

  •           Health care costs are too confusing with current payer mix – 90%
  •           Physicians aren’t trained to discuss the cost of care – 86%
  •           The tools necessary to estimate costs to the patient are not available – 78%
  •           Tools necessary to estimate costs to health care delivery system, not available –77%
  •           There isn’t enough time in clinic to discuss cost of treatments with patients – 64%
  •           Physicians should make the best treatment decisions irrespective of cost – 57%
  •           Physicians should be held accountable for the cost of care to a patient – 28%
  •           It’s not the physician’s responsibility to educate patients about costs – 18%

Current strategies involving physicians are focused at the organizational level, such as with value based care and accountable care arrangements. When you get at the individual level, these survey results indicate that it would seem there is a reason current cost strategies emphasize purchaser and consumer solutions.

Thursday
Jun072018

The 260 Page 2018 Annual Medicare Trustees Report and the Part D Rx Share of the Pie

By Clive Riddle, June 7, 2018

 

This week CMS released the 2018 Annual Medicare Trustees Report, which provides a financial/actuarial analysis of the current state of the Medicare Fund, and projections regarding the Fund solvency going into the future.  The big takeaway always emphasized from the report is at what year in the future will the Fund become insolvent, but there really is a lot of historical information in the report worth a gander.

 

In regard to when the Fund is projected down, we are told the “Trust Fund will be able to pay full benefits until 2026, which is three years earlier than last year’s projections, attributable to adverse changes in program income. The Trustees project that total Medicare costs (including both HI and SMI expenditures) will grow from approximately 3.7 percent of GDP in 2017 to 5.8 percent of GDP by 2038, and then increase gradually thereafter to about 6.2 percent of GDP by 2092.”

 

But in addition to the voluminous portion of the report dedicated to projections taking us to near the end of the century, there’s plenty of history and present tense buried in the 260 page report as well. Here’s a snapshot from the report of Medicare in 2017:

It’s interesting to look out what portion of the expenditures are from Part D. On a gross basis, $100.1 Billion in Prescription Drug expenditures out of $702.1 Billion in benefits represents 14.3% of benefit expenditures.

 

But not all beneficiaries have Part D coverage, so that’s not an apples to apples percentage.

Looking at 2017 benefits for Part A, Part B, Part C and Part D combined, total benefits were $702.1 Billion, of which 29.9% ($209.7 Billion) was spent through Part C, the Medicare Advantage program. Given the analysis doesn’t break down the benefit expenditure categories for the contracting Part C Medicare Advantage plans, here’s a breakdown of the Regular Medicare expenditures including Part D (backing out Part C):

  • Hospital:  43.6% ($197.9 Billion)
  • SNF: 6.2% ($28.3 Billion)
  • Home Health Care: 4.1% ($18.4 Billion )
  • Physician Fees: 15.2% ($69.1 Billion)
  • Prescription Drugs (gross adjusted): 13.5% ($61.6 Billion)
  • Other: 17.4% ($78.8 Billion)

Regarding the Gross Prescription Drugs adjustment: You will note the above Prescription Drugs total $61.6 instead of the $100.1 Billion in the above snapshot. That’s because the Medicare Advantage Part C enrollees with Part D enrollment were backed out, given that the other benefit expenditure categories didn’t include a breakdown from Part C. So the Part C enrollment in Part D plans, as a percentage of total Part D enrollment – taken from the December 2017 Medicare Advantage/Part D Contract and Enrollment Data Summary Report - was extrapolated (61.5% of Part D Enrollees are not enrolled in Part C; 61.5% of $100.1 Billion in total Prescription Drugs expenditures = $61.6 Billion.)

 

But the only problem with stopping there, is not all regular Medicare beneficiaries are enrolled in Part D. There were 43.2 million PDP enrollees at the end of 2107, while there are 58.5 million total Medicare beneficiaries. Of the 15.3 million 2017 beneficiaries with no Part D, 1.9 million were from Part C, leaving 13.4 million regular(non-part C)  Medicare beneficiaries with no Part D, and 26.2 million with Part D, out of a total 39.6 million regular Medicare beneficiaries. Now if we extrapolate 66% (26.2/39.6 million) for regular Medicare with Part D, from the other benefit expenditure categories (reducing the expenditures by one third for the other categories) we can get an apples to apples look.

 

This will reflect the percentage benefit expenditures extrapolated for Regular Medicare beneficiaries with Part D coverage:        

 

  • Hospital:  40.7% ($130.6 Billion)
  • SNF: 5.8%  ($18.7 Billion)
  • Home Health Care: 3.8% ($12.4 Billion )
  • Physician Fees: 14.2% ($45.6 Billion)
  • Prescription Drugs (net adjusted): 19.2% ($61.6 Billion)
  • Other: 16.2% ($52.0 Billion)

 

19.2% of the Medicare benefit pie for prescription drugs, get us a lot closer to the Milliman analysis just conducted for AHIP in the commercial population, which found Rx representing 23.3% of total costs including administration. If we add in the extrapolated portion (66%) of the $8.2 Medicare administrative expenses from the above snapshot, the regular Medicare prescription drug portion represents 18.9% including administration.

Friday
Jun012018

Anthem, IngenioRx and Taking a Total View of the Prescription Drug Trend

Anthem, IngenioRx and Taking a Total View of the Prescription Drug Trend
 

By Clive Riddle, June 1, 2018

 

In the crossover worlds of national pharmacy chains, PNMs and health plans, we have witnessed the emergence of CVS-Aetna , Cigna-Express Scripts, and the UnitedHealthGroup’s OptumRx fueled by its 2015 acquisition of Catamaran, plus the rumored Walmart Humana pairing. Meanwhile, Anthem took a somewhat different approach, starting their own PBM from scratch instead of acquiring or merging with someone on in the Rx aisle. Thus last October Anthem announced the launch of IngenioRx, which will assume Anthem’s PBM business when its current commitments expire in 2020.

 

IngenioRx, thus sidelined for another year and a half – and looking to improve its visibility while gearing up – just released just released a Drug Trends Report in the same style as other national PBM reports, not letting the fact that it not yet operational serve as a roadblock. Instead, they focused reporting on the current Anthem book of business that they will be serving.

 

With that in mind, here’s what they shared for Anthem’s 2017 commercial population, emphasizing they were examining the total drug trend, including medical benefit and prescription benefit utilization, unlike many reports from others that are only positioned to report on the prescription benefit experience:

·         21% of Anthem’s total drug spend was administered via the medical benefit,, and 79% via the pharmacy benefit. For specialty drugs only, the breakdown was 42% medical benefit and 58% pharmacy benefit.

·         Anthem’s total drug trend was 2.0%, comprised of -4.6% non-specialty drug spend and 9.9% specialty drug trend.

·         Anthem’s 2.0% total drug trend drivers included 5.6% inflation, 1.2% new drugs costs, -0.8% reduction in utilization, and -4.0% decrease in costs due to management approaches. For non-specialty drugs, inflation was 4.9%; for specialty drugs inflation was 6.5%.

 

Carving out the prescription benefit to independent PBMs in the health plan world created three inefficiencies: (1) inability to manage the total drug trend due to some drugs administered through the medical benefit, as IngenioRx points out; (2) doesn’t allow for optimal coordination of care between the prescription and medical treatment components; and (3) creates duplication of administrative resources required in administering eligibility and reporting for the two components.

 

If IngenioRx remained just an in-house PBM for Anthem, taking the total drug trend management view will be easier, But Anthem’s IngenioRx will be a stand-alone PBM, pursuing other business as well, and requiring its own separate administrative systems, making taking a total view for the Anthem book of business a little more challenging.

 
Friday
Apr062018

The PBM side of CVS

The PBM side of CVS
 

By Clive Riddle, April 6, 2018

 

Assuming the CVS acquisition of Aetna clears all final hurdles, perhaps the most attention given to the merged company is in respect to the retail synergies. But the CVS Caremark PBM also deserves considerable attention. After all, Cigna’s big merger recently announced with Express Scripts was purely a PBM play.

 

With that in mind, its interesting to poke through the just released 14-page CVS Health Drug Trend Report 2017. Similar to Express Scripts previously released 2017 report, the CVS Health report was certainly positive, and they touted that drug prices for clients  rose “at a minimal 0.2 percent, despite manufacturer price inflation near 10 percent.”

 

But it must be noted that the touted 0.2 percent increase was just for prices. There was 1.7% cost growth due to utilization, yielding a total pmpy drug trend in 2017 of 1.9%, still quite a positive trend.

 

Here is additional data CVS shared about their client experience in 2017:

·         While CVS drug price growth was 0.2%, the manufacturer AWP inflation rates were 9.2& for traditional brands, 8.3% for specialty brands, and 0.4% for generics.

·         The CVS generic dispensing rate was 86.1%.

·         CVS traditional and specialty brands accounted for 14% of prescriptions dispensed, but 69% of pharmaceutical spend.

·         The CVS specialty trend consisted of 3.7% price growth plus 9.2% utilization cost growth for a total 12.9% 2017 specialty trend.

·         CVS gross client costs pmpm were 108.42 pmpm in 2017 compared to $104.10 in 2016.

·         For CVS Clients with managed formularies, costs were $88.94 pmpm compared to $87.43 pmpm in 2016.

·         The managed formulary differential in overall drug trend for 2017 resulted in a 1.7% trend with managed formulary clients compared to 4.2% trend for other clients.

·         42 percent of CVS Health commercial PBM clients spent less on their pharmacy benefit plan in 2017 than they had in 2016.

·         For clients aligned with the company's managed formularies, drug price declined by 0.1 percent, in 2017, as compared to the overall 0.2 percent drug price growth.

·         Member out of pocket costs pmpm declined from $11.99 in 2016 to $11.89 in 2017.

·         In 2017 24% of members had zero out of pocket costs (no claims), 49.4% of members had out of pocket costs under $100, 14.6% had out of pocket costs between $100-$299, 5% had out of pocket costs between $300 - $499, 4.3% between $500-$599 and 2.7% above $1,000.

 
Friday
Sep082017

Health Care's Juicero Problem

Health Care's Juicero Problem
 

by Kim Bellard, September 8, 2017

Bad news: if you were still hoping to get one of the $400 juicers from Juicero, you may be out of luck. Juicero 
announced that they were suspending sales while they seek an acquirer. They'd already dropped the juicer's price from its initial $700 earlier this year and had hoped to find ways to drop it further, but ran out of time. 

Juicero once was the darling of investors. They weren't a juice company, or even an appliance company. They were a technology company! They had an Internet-of-Things product! They had an ongoing base of customers!

The ridicule started almost as soon as the hype. $700 -- even $400 -- for a juicer? The negative publicity probably reached its nadir in April, when Bloomberg 
reported people could produce almost as much juice almost as fast just by squeezing the Produce Packs directly.

 

Moral of the story: if you want to introduce products that have minimal incremental value but at substantially higher prices, you're better off sticking to health care.

Take everyone's favorite target, prescription drugs. As Donald W. Light 
charged in Health Affairs, "Flooding the market with hundreds of minor variations on existing drugs and technically innovative but clinically inconsequential new drugs, appears to be the de facto hidden business model of drug companies."

As with prescription drugs, we regulate medical devices looking for effectiveness but not cost effectiveness -- and we don't even do a very good job evaluating effectiveness in many cases, according to a 
recent JAMA study

Take robotic surgery, hailed as a technological breakthrough that was the future of surgery. A robotic surgical system, such as da Vinci, can cost as much as $2 million, but, so far, evidence that they produce better outcomes is 
woefully scarce

Proton beam therapy? It's one of the latest things in cancer treatment, an alternative to more traditional forms of radiation therapy, and is 
predicted to be a $3b market within ten years. The units can easily cost over $100 million to buy and install, cost patients significantly much more than other alternatives, yet -- guess what? -- not produce measurably better results

Last year Vox 
used 11 charts to illustrate how much more we pay for drugs, imaging, hospital days, child birth, and surgeries than other countries. Their conclusion, which echoes conclusions reached by numerous other analyses: "Americans spend more for health care largely because of the prices."

We not only don't get a nifty new juicer from all of our health care spending, we 
don't even get better health outcomes from it.   

Health care's "best" Juicero example, though, may be electronic health records (EHRs). Most agree on their theoretical value to improve care, increase efficiency, and even reduce costs. But after 
tens of billions of federal spending and probably at least an equal amount of private spending, we have products that, for the most part, frustrate users, add time to documentation, and don't "talk" to each other or easily lend themselves to the hoped-for Big Data analyses. 

Many physicians might, on a bad day, be willing to trade their EHR for a Juicero. 

Jonathon S. Skinner, a professor of economics at Dartmouth,
 pointed out the problem several years ago: "In every industry but one, technology makes things better and cheaper. Why is it that innovation increases the cost of health care?" 

So we can make fun of Juicero all we want, but when it comes to overpriced, under-performing services and devices: health care system, heal thyself first.

This post is an abridged version of the posting in Kim Bellard’s blogsite. Click here to read the full posting